Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: New York
State
DATE: October 21, 1993
Department of Social
Services
Docket No. A-93-245 Decision No. 1445
DECISION
The New York State Department of Social Services (NYSDSS) appealed
a
September 1, 1993 determination by the Division of Cost Allocation
(DCA)
disallowing $448,258 in federal financial participation (FFP).
The
disallowed costs were associated with NYSDSS's lease arrangement for
its
headquarters in Albany, known as the Ten Eyck building, during
the
period of April 1, 1992 to March 31, 1993. The amount
disallowed
represented the difference in FFP between lease costs claimed by
NYSDSS
and a use allowance to which DCA determined NYSDSS was entitled for
the
space costs.
NYSDSS argued that it was entitled to the larger amount (including
amounts
attributable to interest costs) on several grounds. NYSDSS
summarized
its arguments as follows:
Interest is allowable as a cost of space under the
existing
lease/purchase agreement. The Department's claim is
allowable
pursuant to [Office of Management and Budget Circular]
A-87
attachment B, C.2.a. The first occupancy date of October
1,
1980 established in that provision is unreasonable and
should
not bar reimbursement. The distinction in OMB Cir. A-87
between
public and private landlords for lease/purchase contracts
is
unreasonable and rent paid to a public landlord should
be
subject to FFP in the same manner and extent as rent paid to
a
private landlord. The reimbursement paid to the State should
be
subject to the same rules governing payments made by
federal
agencies to their contractors. Federal agencies regularly
pay
their contractors interest under a variety of
contracts.
Finally, Congress through the Tax Reform Act of 1986,
encouraged
states to borrow money to meet their costs of operation and
thus
this federal legislation creates an exception to OMB Cir.
A-87,
Attachment B, D.7.
Notice of Appeal at 2. NYSDSS noted that this appeal is
"substantially
similar" to the issues decided in New York State Dept. of
Social
Services, DAB No. 1336 (1992), and indicated that NYSDSS would
not
object to a summary decision based on the record in DAB No. 1336.
Id.
Another summary judgment for a prior time period based on
substantially
similar facts was issued in New York State Dept. of Social
Services, DAB
No. 1377 (1993).
The decision in DAB No. 1336 addressed each of the arguments raised
by
NYSDSS and found that none of them had merit. Rather, we concluded
that
interest costs for the Ten Eyck building were unallowable under
the
plain terms of OMB Circular A-87 and that only a use allowance
was
permissible for the costs of space in that building.
In acknowledging the appeal, the Presiding Board Member proposed to
issue
a summary decision unless DCA objected to that procedure within
14
days. The 14 days have expired, and the Board has received no
objection
from DCA.
Therefore, we sustain the disallowance of $448,258 based on DAB No.
1336,
which we incorporate by reference.
___________________________
Donald
F. Garrett
___________________________
Norval
D. (John) Settle
___________________________
Judith
A. Ballard Presiding
Board
Member